0901-06 / Die Geldentwicklung wird negativ

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Eine Finanzanalyse



wird noch übersetzt

Uh Oh..... Monetary Flat Spin

Jetzt ist der Geldumschlag knapp unter 1,0 gesunken

Was hat das zu bedeuten ?

Hier könnte man ableiten wie die Geldversorgung in einem Teilbereich des Reserve- Geld-Systems funktioniert (jedem), aber den meisten Lesern fielen dann die Augen heraus.

Das Bedeutende obiger Graphik ist seine Aussage. Bernanke hat die Kontrolle über "N" (das heißt die Geschwindigkeit) verloren, das ist der Parameter an dem er zu drehen versucht, wenn der Leitzins verändert wird (tatsächlich ist es jedoch der Markt der dies vorgibt - trotz seiner Proteste).

Tatsächlich ist das sinnvollste Instrument der Federal Reserve im Sinne der Beeinflussung der Geldpolitik ist das Reden (entweder mit Schmeicheleien oder mit Drohungen).

Das Problem mit einem M1 Multiplikator unterhalb von 1,0 ist, daß der Effekt Geld zu drucken sich mit der Geschwindigkeit multipliziert. Das bedeutet, wenn man 10 Dollar druckt und der Wirtschaft zur Verfügung stellt, dann hängt die Wirkung in der Wirtschaft davon ab, wie oft das Geld in einer bestimmten Zeit zirkuliert. Je öfter das geld zirkuliert, desto größer entfaltet es seine Wirkung in der Wirtschaft.

Die schlechte Nachricht ist, wenn der Multiplikator unter 1,0 sinkt, um so mehr Geld muß auf den Markt geworfen werden - aber um so geringer entfaltet es Wirkung, denn jeder zusätzliche Dollar hat nur noch geringeren Effekt.

If you remember the "GDP for each dollar of debt" graph....

M1's multiplier going below 1 strongly implies (but does not yet prove) that we have reached that "zero hour".

Why? Because all money is in fact debt; this is inherent in all modern monetary systems.

When Bernanke "creates" money he is doing so against an asset - that is, he is issuing debt. A Federal Reserve Note (whether electronic or paper) is in fact effectively a bond of zero maturity and indefinite expiration against the future tax collection capacity of The United States.

That is, it's a treasury bond (via a circuitous route)

The paradox that Bernanke is in danger of discovering (the hard way) is the paradox of a pilot who finds himself in a flat spin. As the ground approaches he wants to pull back on the stick but if he does so, the spin simply tightens as the wings are not producing lift - the angle of attack is too high, not too low. As such if he does what his brain screams at him to do instinctively, he dies.

Or the scuba diver who sucks on the reg and gets nothing. Your instinct is to hold your breath and kick for the surface. If you do it you die.

In both cases your only hope of survival is to do exactly the opposite of your instinct. In the case of the pilot you must not only give counter-rudder (to stop the rotation) but also push the stick forward. In the case of the diver you must exhale that last breath you have in your lungs, knowing there are no more in the tank while you kick to ascend.

If you succumb to instinct you are dead. Really dead, as in splat (or exploded lungs.)

Bernanke is effectively in the same box. The foundation of his entire thesis as a banker is that a central bank can always reverse a deflation by printing money. Unfortunately as he has done so velocity has fallen and the multiplier has now gone below 1. If this induces him to do even more of what caused this decrease there is a very real risk that the actual market reaction will be to tighten the monetary flat spin.

This is because the underlying problem in the economy isn't the lack of debt (money) in the system. It is that there is too much debt of all sorts, and since money is in fact a form of debt, you can't fix the problem by playing helicopter drop!

As I have said for more than a year the only way out is to force the bad debt out into the open and default it. Yes, this will produce bankruptcies - lots of them, including some for "inconvenient" people like Paulson's buddies on Wall Street.

But until and unless that happens adding more debt to the system depresses the multiplier effect of that debt on circulation further, and harms, rather than helps the situation.

I don't expect our government officials to understand the math on this, nor would trying to go through it help 99% of the readers, but unfortunately, mathematics is the only true science - and you can't twist it, no matter how hard you try.

Bernanke knows this at an intellectual level, just as the diver - or pilot - knows that if he holds his breath (or pulls the stick) he is going to die.

The question now becomes whether Bernanke can overcome not only instinct but also political pressure to do the wrong thing and instead use his intellect - and the math - to do the right thing.

What is the right thing? Paradoxially, it is to withdraw liquidity and by doing so force the bad debt into the open where it does (and must) default.

How far can the above ratio contract before we cross an "event horizon" from which there is no escape?

I don't know.

But I do know that there is a "too late" point, as there is for all such things, and that we are approaching it, as I have been saying for months.

BTW, evidence that Bernanke's Monetary Flat Spin is already impacting the economy in ways that may do critical (if not fatal) damage was found this morning in the Case-Schiller numbers. Everyone, including Bernanke, was expecting the rate of home price declines to start to slow in the second half of the year. Instead, they accelerated.

We're in uncharted territory folks, and the forecast is for dark-and-stinky storms.